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HEERF lost revenue claims: Guidance for higher ed

May 24, 2021

The Department of Education (ED) released guidance clarifying that colleges and universities can claim lost revenue against their HEERF grants. The department’s goal was to allow greater flexibility in the use of HEERF funds and allow institutions to better meet student needs. 

Lost revenues are a significant source of allowable costs. To understand the parameters, institutions can review the lost revenue guidance published by the ED on March 19, 2021 and the proposed eligibility requirements published May 11, 2021.

Takeaways from the HEERF lost revenue guidance:

Lost revenue refers to revenues that an institution of higher education expected but were reduced or eliminated as a result of the COVID-19 pandemic. As such, ED acknowledges that lost revenues can only be estimated.

Allowable lost revenue sources can include:

  • Academic sources: tuition and fees, institutional charges, discharge of student debts, room and board, supported research, summer terms and camps
  • Auxiliary sources: cancelled events; disruption of food, dorm and childcare services; facility rental, bookstore, parking and lease revenue; royalties and other operating revenue

Lost revenue that cannot be reimbursed under HEERF:

  • Student fees/revenue associated with athletic facility enhancement, revenue for the acquisition of real property, contributions, revenue linked to marketing or recruitment activities, sectarian instruction or religious worship, alcohol sales and investment income

Higher ed institutions should take care not to claim lost revenue attributable to a cause other than the COVID-19 pandemic. Non-reimbursable claims could include, for example, revenue lost due to a previously planned dorm remodel, the elimination of a degree program, research grant expiration, one-time royalty payments, etc.

Lost revenue estimates can be calculated from March 13, 2020, through the end of the HEERF grant performance period listed on the grant award notification.

How to calculate lost revenue

ED guidance indicates that institutions have flexibility in how they calculate their estimated lost revenue. Options include:

  • Year-over-year comparisons
  • Semester-over-semester comparisons
  • Comparison to three- or five-year average
  • Comparison to budgeted or projected revenue
  • Comparison to a baseline fiscal year prior to the March 13, 2020, national emergency declaration

Generally, institutions must be consistent in their calculation methodologies and should not “double dip” (i.e., include lost revenue estimates that were already applied to HEERF grant funds or submitted to another federal relief program).

Calculating lost tuition revenue

When calculating lost tuition revenue, institutions will need to consider whether base year methodologies present tuition inclusive of institutional aid and apply the methodology consistently. For example, waivers and discounts would be considered institutional aid/allowances. Typically, institutional budgets plan on aid to students and adjust their projections accordingly. Therefore, institutional aid is not an expense but an accurate reflection of the student’s cost. 

Calculating lost revenue related to discharge of student debt

Institutions may discharge student debt or unpaid balances by discharging the complete balance of the debt as lost revenue and reimburse themselves through their HEERF institutional grants, including associated fees and penalties. However, the institutions cannot condition, nor imply condition, discharging these funds on the condition the student takes any specified actions, such as continued enrollment.

Calculating lost revenue for outsourced service arrangements

It’s common for institutions to provide services for which they are the agent, not the primary service provider (e.g., daycare, food service, fitness centers, parking, etc.).

When calculating lost revenue, institutions should use the revenue net of payments to the service provider. In other words, lost revenue is the amount the institution retains after the service provider has been compensated.

In cases where the service provider required a minimum fee, despite little to no services rendered, institutions may have a negative net amount that represents lost revenue for that service. Compare that to an allowable base year (see bullets above) to arrive at lost revenue.

Calculating lost operating revenue

When estimating lost operating revenue, claims can be calculated at the gross amount without factoring in the expenses saved due to cancelling the activity. 

Save your work

Be sure to document your lost revenue estimates, including your rationale, methodology and data used to determine lost revenue amounts. 

How Wipfli can help

If you have questions about HEERF grants, contact a Wipfli advisor. In addition to grant application support, we can discuss how HEERF grants will impact your financial statements.  

You can also sign up to receive additional information about the American Rescue Plan Act in your inbox, or visit our COVID-19 resource center for more on how to navigate the pandemic and resulting changes.

Related content:

American Rescue Plan Act provides relief to higher education, community colleges


Sara McKenna, CPA
Senior Manager
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